Definition of Real Estate Bubble

In the economy of a nation a bubble occurs when there is a sustained increase in the price level of an economic asset. In this way, when house prices rise dramatically over a period of time, many people believe that the Price will not stop increasing and this is generating an economic effervescence known as the real estate bubble.

This phenomenon generates a false perception social, since it seems that the price of housing cannot go down. As is known, any bubble can burst at any time and real estate too.

The real estate bubble in Spain exploded in the context of the global economic crisis that began in 2008

In 1998 the government of José María Aznar launched a new law of soil. According to this law, the land market was released and this circumstance increased the volume of developable land throughout the country. territory national.

The idea of ​​this liberalization was simple: by increasing the developable land, the land market would grow notably for the entrepreneurs of the

building and this would eventually lead to a greater volume of homes built, which would generate jobs and thus the overall economy would improve as a whole. This initial idea was fulfilled and translated into economic growth and, in parallel, strong job creation in the construction sector.

In this context, many Spaniards bought houses because they understood that it was a good investment and, in fact, it was popularly spoken of "investing in brick."

One of the consequences of all this was the increase in housing prices and the increase in the price of land

In this sense, in 2005 in Spain more houses were built than in the whole of the European Union. At that time, there was talk of the Spanish economic miracle and there was a period of splendor. That was when the housing bubble was in its peak.

House prices soared, but this increase was not accompanied by an increase in wages. On the other hand, the banks promoted a politics of very risky housing loans and lowered the requirements to grant loans.

In 2007 the debt of families and the state had increased notably and when the crisis began global economy originated in the US, Spanish banks stopped lending money, investors stopped buying debt and the consumption of citizens collapsed. At that moment the real estate bubble burst and the economic crisis worsened even more.

Consequences of the bursting of the real estate bubble in Spain

Its outbreak unleashed a series of serious problems: evictions due to non-payment of the mortgage payment, massive layoffs in the construction sector and many people had a house that they could not afford because they had run out of job.

Photos: Fotolia - peshkova - kaliantye

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